Did You See What Billionaire Mason Hawkins Just Did?

Billionaire Mason Hawkins: There are more than 40 hedge fund billionaires in action today. Tracking the consensus picks of this group is the heart of the MarketWatch Insider Monkey Billionaire Hedge Fund Index [s:BHFI], which has outperformed the indices handily over its lifetime of nearly two years. Our research at Insider Monkey indicates that retail investors who follow the best picks of the best fund managers can beat the market by 18 percentage points a year over the long-term.

Within this elite group of billionaire hedge fund managers, George Soros, Carl Icahn and Dan Loeb are a few of the guys present, but one other lesser known name is Mason Hawkins of Southeastern Asset Management. Hawkins has a net worth of approximately $1.8 billion and manages roughly $32 billion in assets at his fund. Last week, Hawkins and Southeastern made a couple interesting moves that you should be aware of.

Wendy’s

In a passive filing with the SEC on Thursday, Hawkins disclosed that his stake in The Wendy's Company (NASDAQ:WEN) had fallen just below the 5% level, representing about half of his total stake reported in Southeastern’s most up-to-date equity portfolio (see it here). With shares of the fast food operator up more than 55% year-to-date and trading at an extremely overvalued price-to-earnings growth multiple above 17, it’s quite possible the billionaire is taking his profits now. Wendy’s last paid its quarterly dividend in mid-September and currently offers a yield of 2.3%, so Hawkins’ decision to slash his holdings after this date makes sense.

Mike Vranos and John Burbank are a couple hedge fund managers that dropped their stakes in Wendy’s entirely in the last round of 13F filings, but there’s still a fair amount of interest here. We think it’s best to see how Hawkins trades the stock in the next few months because even with the solid income and Wendy’s restaurant transformation taking hold, there are better entry points into this stock.

Quicksilver Resources

Unconventional oil & gas play Quicksilver Resources Inc (NYSE:KWK) was another company cut by Mason Hawkins last week, this time entirely. In his last 13F, Hawkins reported ownership of $38 million in Quicksilver and he had held the stock since the third quarter of 2011. It’s not crystal clear exactly why the fund manager decided to drop the long-term holding from his equity portfolio, but poor returns are a simple reason why a move might’ve been made.

Quicksilver’s stock price had been squeezed by almost -50% over the past year as lower gas prices and above-average debt hasn’t exactly endeared the asset-heavy firm to investors. A sale earlier this year of its Barnet Shale resources to Tokyo Gas led to a modest recovery in share price over the past few months, which may be why Hawkins decided to sell.

Even if you’re a permabull on natural gas prices, there are less troubled places to invest in this trend. Hawkins himself holds large positions in Chesapeake Energy Corporation (NYSE:CHK), Murphy Oil Corporation (NYSE:MUR) and CONSOL Energy Inc. (NYSE:CNX), which have outperformed Quicksilver stock by a whopping 41 percentage points on average in 2013. Hawkins is going with the winners in oil and gas, and he isn’t a bad man to follow if you’re looking for investments in this space. Each member of this trio also pay a dividend yield of at least 1.3%, while Quicksilver does not offer a yield of any kind.

One new pick

With that being said, the only brand new position Hawkins built during the last 13F filing period was in Mosaic Co (NYSE:MOS). The billionaire holds a little under $50 million in the potash and phosphate producer, which upped its dividend by 15% last quarter. Mosaic now offers a dividend yield of 2.2% at a reasonable forward earnings multiple of 14, and price-to-earnings growth metrics are fairly valued.

With a sturdy balance sheet and moderately strong cash flows, Mosaic represents everything that Quicksilver does not; it’s easy to see why Hawkins has swapped the stocks for one another. Macroeconomic tailwinds in EM crop markets are expected to be a main driver for Mosaic’s nutrients business moving forward, and it’s a distinct possibility that Hawkins and Southeastern will be long-term shareholders.